A Humble Proposal to Sanction Some Hungarian Kleptocrats

April 4, 2018

Barring unforeseen upset, on April 8 Prime Minister Viktor
Orban will waltz his way to reelection, strengthening his two-thirds majority
in Hungary and his role as the leading symbol of Europe’s growing illiberal
threat. Orban has been at the center of a startling number of corruption
allegations in his eight years in power, many now coming to a head as the vote
nears. Two months ago, the European Anti-Fraud Office (OLAF) reported that
Hungary’s procurement of $1 billion of EU funds for lighting projects suffered
from legal “irregularities” and conflicts of interest—including 40 million
Euros’ worth linked to projects of Orban’s son-in-law, warranting an
investigation into “excessive budgetary fraud.”

Just last week,
Hungarian daily the Magyar Nezmet claimed Orban and his cronies overcharged the
EU for various procurement contracts, redistributed the funds through banks owned by Orban associates, and converted them into diamonds that
could be laundered through
lesser-regulated “hawala” banks offshore in the Arab world, known for sometimes
laundering terrorist money. As those allegations were breaking, the journalism
non-profit Direkt36 also reported Orban-linked intermediaries have been selling Schengan visas and Hungarian (i.e. EU) residency to anyone that can
pay the price—opening up all of Europe to the buyer. The beneficiaries of this
scheme reportedly include hundreds of un-vetted Russians and a close associate
of Bashar al-Assad, one who happens to be on the U.S. sanctions list. Even now,
days before the election, fresh charges continue to roil the Hungarian media.
The sheer number might prevent Orban’s Fidesz party from keeping their 2/3 parliamentary
majority, which allows them to change the constitution at will. But with the
opposition unable to organize and unite, they’re unlikely to unseat Fidesz
outright.

Thus far, the U.S. has done little to counter the growing
security threat and troubling embrace of authoritarianism on Europe’s border.
The EU, for its part, has
not acted on Hungary’s multiple violations of basic values enshrined in the
foundational EU treaties, only belatedly issuing a non-binding resolution
calling for “dialogue”
between Hungary the European Commission.

Romania, meanwhile, is following suit, with the President considering parliament’s
proposal to change appointment processes for lead prosecutors, limit procedures
for investigating corruption, and eliminate some corruption crimes from the
penal code. Austria is remaking its public
media through financial cuts and attacks on outlets that criticize the new
nationalist government. And the Czech Republic has recently reelected the similarly
euroskeptic, Russophilic, and anti-migrant president Milos Zeman. Orban-style policies are gaining ground
across Europe, winning votes—and changing norms.

So far, the EU has acted only against Poland. In response to
the Law and Justice Party’s repeated restructuring and weakening of its
judicial institutions, the EU initiated an accountability process known as the Rule
of Law Mechanism. The process, laid out in Article 7 of the Treaty of the
EU, states that a member that violates the basic values of the union—“democracy, equality, the rule of law, and respect for human rights”—may lose
voting rights in the EU if members unanimously agree to the sanction. The
negotiation process, however, has dragged. Since 2017, the European Commission
has repeatedly set new deadlines by which Poland must institute changes, and
Poland has repeatedly ignored them.

President Trump, meanwhile, has appeared to tolerate or even
encourage Eastern European authoritarianism. In his speech in Warsaw last July,
he lauded the Polish government as it was perched to pass legislation crippling
its own Supreme Court and Common Court system—two pieces of legislation were
signed within days of his speech. He repeatedly
emphasized the need to protect
“our civilization”, and “our borders” from attackers, echoing the coded
language Hungary and Poland use to support anti-immigrant, anti-democratic,
nationalist policies. Just days
after the address, the Polish government introduced new controversial laws
attacking the independence of judges, and right-wing media released a list of
enemies of “Western Civilization.”

In theory, the United States is well-positioned to check
these states—not least because U.S. influence seems to matter to Orban,
who recently expelled a single
Russian diplomat to preserve appearances over the Skripal poisoning in the UK,
and maintains a steady and well-funded lobbying
presence in Washington to convince Congress that Hungary’s policies don’t
contradict NATO values. U.S. travel bans
of Hungarian officials in 2014 to rein in kleptocracy got their attention,
and for a moment paused their anti-constitutional takedown. At a minimum, as a
fellow NATO member, the U.S. could, at the July NATO Summit or November
Parliamentary Assembly, verbally condemn Hungary’s Russian
entanglements as a Skripal-like threat to international norms, while
raising questions about Orban’s policies through a security lens.

But the U.S. also has a more concrete and targeted option:
the Global
Magnitsky Act. Passed in 2016, the Act allows the U.S. administration to
apply sanctions, such as visa bans and prohibitions on use of U.S.-affiliated
banks, to an individual that has engaged in serious human rights abuses or acts
of corruption. The standard was originally more stringent, but in December, in
one of the few human rights-supportive moves he has taken in office, President
Trump relaxed
the requirements for such sanctions. The first round of designations issued
in December 2017, named 15
individuals and 37 entities, including the son of the Russian Prosecutor
General Yury Chaika, and the daughter of the late president of Uzbekistan Islam
Karimov.

The growing list of Orban’s kleptocratic and transnational
corrupt schemes provide ample fodder for sanctions under Magnitsky, from the
intermediaries that hand over visas to un-vetted Russians or Assad’s helpers to
the lobbyists for Russian business interests in Budapest that helped secure
sweet deals for Kremlin-linked companies at the expense of Hungarian taxpayers. In light of the corruption allegations
flying this week involving the electoral,
judicial, transportation,
gas,
nuclear,
religious,
real
estate, and general business sectors, the U.S. government should have a menu
of options to choose from.

The narrowly tailored approach of Global Magnitsky sanctions
also provides a way around the general problem of sanctioning a NATO ally and
EU member, by targeting not the actions of the government as a whole, but
rather individual corrupt or rights-violating acts. And in an environment where
the U.S. president seems reluctant to push against Russia personally or directly,
Magnitsky sanctions offer a less confrontational option: a way to target individuals
that have opened the door to Russian corruption—such as those handing the contract
to expand Hungary’s Paks
nuclear plant to a Russian state company without a public bid—without
direct state-to-state conflict. Pushing back against Russian interference while
warning Orban off further illiberal ventures, initial designations might
involve fringe members of Orban’s circle, adding closer associates to the list if
the message is not heeded.

Yet the idea is perhaps most intriguing as a way of
supporting the EU’s unprecedented and fragile self-policing efforts. The
accountability provisions of the Rule of Law process the EU is trying to use on
Poland require a unanimous agreement among EU states. This won’t be possible if
Hungary holds fast to its promise to veto any action. However, if sanctions can
be used to apply pressure to Hungary from just the right angle at the right
time, the U.S. could weaken the Poland-Hungary euroskeptic alliance, and make
EU action more likely to succeed. With just a bit of pressure, in coordination
with European governments, building on Eastern European public frustration, the
U.S. might set in motion a promising response to the anti-democracy wave in
Europe.

As President Trump fends off criticism over cozying up to
dictators, Hungarian sanctions offer a quick way to boost his credibility. For the
U.S. they offer the opportunity to harmonize concerns regarding democratic
backsliding in NATO and the E.U. with more hardline policies toward
authoritarianism outside Europe. And as far-right parties gain troubling
footholds further and further west, like Alternative für Deutschland in
Germany, champions of liberalism have a powerful incentive to cooperate
with one another. Curbing Hungarian kleptocrats may be one move everyone
can agree on.

Melissa Hooper is a lawyer and Director of Human Rights and Civil Society at Human Rights First.